CoAdvantage- Too many organizations are too disorganized when it comes to compensation strategy. They make compensation-related decisions in a haphazard manner that (1) discounts applicable laws and regulations, (2) obscures whether their approach to compensation generates appropriate ROI, and (3) makes compensation and payroll management unnecessarily difficult.
This kind of ad hoc approach to compensation strategy often results from being overwhelmed by all the related considerations. To help, this article will break down compensation management, strategy, and compliance into component parts. Business owners and executives will still have to work their way through each question, but the checklist will at least help clarify the issues that need to be addressed and the questions that must be answered.
· Have you developed a written compensation policy that guides executives and promotes consistency in compensation decision-making throughout the organization?
· Does your compensation policy or strategy address a total compensation package that includes incentives, bonuses, and/or any other financial benefits you offer, in addition to salaries and wages?
· Are decisions regarding compensation, promotions, and merit raises based on objective, fair criteria? Are those criteria included in your compensation policy?
· Are any bonuses or incentive payments tied to clearly documented triggers (e.g., sales performance or profit-based measures)?
· Have you researched and developed compensation benchmarks appropriate for your industry and geographic region?
· Have you documented your reasoning for any one-off or unusual compensation decisions to ensure they are reasonable?
· Do you regularly review and adjust compensation levels and plans? Note that some regulations require regular reviews (e.g., every three years).
· Does your compensation strategy account for cost of living allowances?
· When reviewing compensation plans, do you solicit employee feedback? For example, if you might be considering a new incentive payment program, it would be helpful to ensure the program would actually encourage performance.
· Does your management system allow you to prepare official documents (e.g., W-2 forms)?
· Can your system generate all applicable reports (e.g., EEO-1 reports)?
· Can staff access payroll information and time off tracking via a web portal?
· Can you track Family and Medical Leave time off?
· Does your system address payroll tax withholdings and filings?
· Does your system allow for direct deposit as well as paycheck distribution?
· Have you audited salaries to ensure that you pay at least minimum wage?
· Have you audited all currently exempt positions to ensure they meet salary requirements and the duties test? Remember, job title alone does not determine employee classification.
· Have you considered reclassifying employees, both to comply with the law and for strategic purposes? For example, it might be more cost-effective to hire additional employees than to pay existing employees significant overtime.
· Do you have training procedures to ensure employees understand when and how they need to manage time-keeping?
· Do you have procedures in place to ensure pay equity where required by law (e.g., you’re not systematically discriminating against a protected class)?
· Have you reviewed pay practices to ensure they align with the Fair Labor Standards Act?
· Have you reviewed pay practices to ensure they align with any applicable state and local laws?
Unfortunately, this list of questions and considerations is just the start. Compensation is complicated! For more insight, check out our previous webinar, Overcoming Potentially Problematic Pay Practices, on our youtube channel.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.